Euro zone business activity maintained growth in May, PMI shows

Reuters Staff

2 Min Read

FILE PHOTO: The famous skyline with its banking district is pictured in early evening next to the Main River in Frankfurt, Germany, January 19, 2016.Kai Pfaffenbach/File Photo

(Reuters) - Euro zone business activity remained strong in May, underpinned by increasing demand, according to a survey released on Monday, which suggested the pace of growth was putting the economy on a path towards a sustained recovery.

Markit's final composite Purchasing Managers' Index for the euro zone was 56.8 in May, unchanged from both April's index and the May flash estimate. It has been above the 50 mark that

divides growth from contraction since mid-2013.

The survey compiler, IHS Markit, said its data was consistent with gross domestic product growth of 0.7 percent in the second quarter. That is considerably higher than the 0.5 percent rate economists predicted in a Reuters survey.

"The outlook for the euro zone economy seems to be tilting to the upside, and it seems likely that we'll start to see many forecasters' expectations for 2017 growth revised higher," said Chris Williamson, chief economist at survey compiler Markit.

The new businesses sub-index, which climbed to 55.9 from a flash reading of 55.5, suggests activity in the coming months will remain solid. although several other indices pointed to

lower levels.

"With the rate of job creation rising to one of the highest seen over the past decade, the recovery is also becoming more sustainable, as the improved labor market should feed through to

higher consumer spending," Williamson said.

The output prices index showed output prices rose at a slower pace in May, falling to 52.4 compared with a flash estimate of 52.8.

Euro zone inflation slipped to 1.4 percent, its lowest level since December, suggesting the European Central Bank policymakers will remain cautious about any change to its monetary stimulus .

The services PMI edged down to 56.3 in May from 56.4 in April, although it was up marginally from a flash reading of 56.2.